With India’s rapid technological progress and extraordinary breakthroughs, particularly with the introduction of COVID-19, the fintech sector has been on a steady upward trajectory. With the increasing popularity and understanding of cryptocurrencies such as Bitcoin, Ripple, Dogecoin, and others among Indians, many people have begun to invest the majority of their time and money in virtual currencies in the hopes of profiting from the current worldwide wave.
The Reserve Bank of India, India’s ultimate financial body, has defined cryptocurrency as a type of digital/virtual currency issued using a sequence of written computer codes that rely on cryptography, or encryption, and is thus independent of any central issuing authority per se. It has emerged as a person-to-person issuance and transaction system that employs private and public keys to enable authentication and encryption for safe transactions, supported by blockchain technology.
Despite the fact that the Inter-Ministerial Committee’s report was still pending, the RBI issued a circular in early April 2018 prohibiting all commercial and cooperative banks, small finance banks, payment banks, and non-bank financial companies (NBFCs) from not only dealing in virtual currencies but also from providing services to all entities dealing in virtual currencies. This effectively brought the crypto sector to a halt, as exchanges required banking services to transmit and receive money in order to turn it into cryptocurrency and pay workers, vendors, and office space, among other things. The situation surrounding cryptocurrencies and their use, however, drastically changed on March 4, 2020, when India’s highest court, the Hon’ble Supreme Court of India, issued a well-considered judgment quashing the RBI’s previous ban. The subject was primarily addressed by the Hon’ble Supreme Court of India in light of Article 19(1)(g) of the Indian Constitution, which provides the right to practice any profession or carry on any occupation, trade, or business, as well as the idea of proportionality.
The Reserve Bank of India has issued a warning to the general public about the potential misuse of private cryptocurrencies in a variety of ways. If the New Bill imposes a complete prohibition on private cryptocurrencies, however, cryptocurrency investors will be forced to invest and trade in unregulated marketplaces. Furthermore, the goal of enacting a virtual currency/cryptocurrency law is to make the process of dealing with and holding virtual currency/cryptocurrency easier in a safer technological environment. Even with the introduction of state-owned cryptocurrency that will be regulated by the RBI, the risk factor associated with cryptocurrency investment and holding will remain the same.
Furthermore, according to the most recent modifications to Schedule III of the Corporations Act, 2013, the Government of India has mandated that companies must disclose their investments in cryptocurrencies beginning with the next financial year. That is to say, businesses must now declare profit or loss on cryptocurrency/virtual currency transactions, the value of their holdings, and details of any deposits or advances received for the purpose of trading or investing in cryptocurrency or Virtual currency. People working in the crypto business have greeted this move with open arms since it is understood that it will allow all Indian enterprises to carry cryptocurrency on their balance sheets.
Conclusion:
Based on the inferences that can be derived from the aforementioned facts and the current state of affairs in the cryptocurrency sector, it is clear that there is a lack of clarity in India when it comes to cryptocurrency legislation. Well-structured cryptocurrency legislation that covers crypto trading exchanges, blockchain technology, investors, and those who work in the sector is urgently needed, and such regulation requires more attention.
Conclusion:
Based on the inferences that can be derived from the aforementioned facts and the current state of affairs in the cryptocurrency sector, it is clear that there is a lack of clarity in India when it comes to cryptocurrency legislation. A well-structured cryptocurrency legislation that covers crypto trading exchanges, blockchain technology, investors, and those who work in the sector is urgently needed, and such regulation requires more attention.
[1] Reserve Bank of India, Prohibition on dealing in Virtual Currencies (VCs), (April 6th 2018), www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11243&Mode=0
[2] Internet and Mobile Association of India V. Reserve Bank of India, Writ Petition (Civil) No.528 of 2018
[3] http://www.mca.gov.in/Ministry/pdf/ScheduleIIIAmendmentNotification_24032021.pdf
